0Denominations
"A surgical strike against Corruption"
On the evening of 8th November 2016, Prime Minister Narendra Modi made an unprecedented speech on national television stating all currency notes of denominations Rs. 500 and Rs. 1000 were to lose legal sanction from midnight. In his 40-minute address, Modi said that notes of Rs. 500 and Rs. 1000 would merely be “just worthless pieces of paper”. Modi talked about how India has become the “bright spot” in the global economy and the government’s dedication to fight against poverty .
While currency notes of Rs. 500 were to be re-issued, Rs. 1000 currency notes were completely banned. Additionally, new currency notes of denomination Rs. 500 and Rs. 2000 were introduced in limited numbers from November 10. However, all notes in lower denomination remain unaffected.
ATMs were not operable on 9th and 10th November, only 50 days were provided for exchanging and depositing notes in banks and post offices, and even though officially some emergency places like hospitals, train/bus bookings, petrol pumps, etc. were supposed to accept these invalid OHD notes till 11th November midnight.
The objective :
The government’s stated objective behind the demonetization policy are as follows;
First, it is an attempt to make India corruption free.
Second it is done to curb black money,
Third to control escalating price rise,
Fourth to stop funds flow to illegal activity,
Fifth to make people accountable for every rupee they possess and pay income tax return.
Finally, it is an attempt to make a cashless society and create a Digital India.
Merits of Demonitisation :
The demonetization policy will help India to become corruption-free. Those indulging in taking bribe will refrain from corrupt practices.
This move will help the government to track the black money. Those individuals who have unaccounted cash are now required to show income and submit PAN for any valid financial transactions.
The move will stop funding to the unlawful activities like criminal activities, terrorism etc. that are thriving due to unaccounted cash flow.
This move will stop the circulation of fake currency.
This move has generated interest among those people who had opened Jan Dhan accounts under the Prime Minister’s Jan Dhan Yojana. They can now deposit their cash under this scheme and this money can be used for the developmental activity of the country.
The demonetization policy will force people to pay income tax. Most of the people who have been hiding their income are now forced to come forward to declare their income and pay tax on the same.
Even though deposits up to Rs 2.5 lakh will not come under Income tax scrutiny, individuals are required to submit PAN for any deposit of above Rs 50,000 in cash. This will help the income tax department to track individuals with high denominations currency.
The ultimate objective is to make India a cashless society.
It is a giant step towards the dream of making a digital India. If these are the merits, there are demerits of this policy as well.
Demerits of Demonitisation :
The announcement of the demonization of the currency has caused huge inconvenience to the people. They are running to the banks to exchange, deposit or withdraw notes. The sudden announcement has made the situation become chaotic.
It has deeply affected business. Due to the cash crunch, the entire economy has been made to come to a standstill.
Rural area farmers had slightly more inconvenience keeping in mind that there was the Rabi crop harvest season, where the farmer must have earned cash for their harvest.
The banks, however, experienced the logistical problem of handling all the money .
The other problem was the managerial difficulty of handling long queues and the overburden of work in the next couple of days.
Many poor daily wage workers are left with no jobs and their daily income has stopped because employers are unable to pay their daily wage.
The government is finding it hard to implement this policy. It has to bear the cost of printing of the new currency notes .
The 2000 rupees note is a burden on the common people as no one likes to do transaction with such high value currency for small things.
Further, many people have discarded the demonetized currency notes and this is a loss to the country’s economy.
Conclusion :
Given the fact that black money is stored in various forms such as Gold, real estate, etc. demonetizing currency notes of Rs. 500 and Rs. 1000 will only curb black money that is in the form of physical/ hard cash.
In other words, The government has initiated a war against corruption and black money but this must be treated as a beginning and further steps should be taken to stop generation of black money and the need to do so. Only then will this decision of demonetising high denomination currency hold the significance the government has intended it to.
